Correlation Between HomeChoice Investments and Capitec Bank
Can any of the company-specific risk be diversified away by investing in both HomeChoice Investments and Capitec Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining HomeChoice Investments and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeChoice Investments and Capitec Bank Holdings, you can compare the effects of market volatilities on HomeChoice Investments and Capitec Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in HomeChoice Investments with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and Capitec Bank.
Diversification Opportunities for HomeChoice Investments and Capitec Bank
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HomeChoice and Capitec is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Capitec Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitec Bank Holdings and HomeChoice Investments is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on HomeChoice Investments are associated (or correlated) with Capitec Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitec Bank Holdings has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Capitec Bank go up and down completely randomly.
Pair Corralation between HomeChoice Investments and Capitec Bank
Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 1.33 times less return on investment than Capitec Bank. In addition to that, HomeChoice Investments is 1.68 times more volatile than Capitec Bank Holdings. It trades about 0.03 of its total potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.08 per unit of volatility. If you would invest 16,894,400 in Capitec Bank Holdings on November 2, 2024 and sell it today you would earn a total of 12,567,300 from holding Capitec Bank Holdings or generate 74.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HomeChoice Investments vs. Capitec Bank Holdings
Performance |
| Timeline |
| HomeChoice Investments |
| Capitec Bank Holdings |
HomeChoice Investments and Capitec Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HomeChoice Investments and Capitec Bank
The main advantage of trading using opposite HomeChoice Investments and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments position performs unexpectedly, Capitec Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Capitec Bank will offset losses from the drop in Capitec Bank's long position.The idea behind HomeChoice Investments and Capitec Bank Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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